College degree has financial benefit: column

We often hear about the rising cost of higher education, but not as much about the economic and societal benefits of a college education. A recent publication by the College Board gives a very thorough analysis of the economic benefits of a college degree.

The median earnings of an individual with a bachelor degree was $56,000 in 2011. In comparison, the median income level of an individual with a high school diploma was $35,400. The estimated median cumulative lifetime earnings of a worker, net of loan repayments, tuition and fees, was approximately $1,150,000 compared to about $800,000 for the median high school diploma holder.

Thus, even when the costs associated with a four-year degree are taken into account, the median college graduate can expect to earn $350,000 more than the median high school graduate. Moreover, the multiplier effect of these higher earnings impacts the rest of the community. These higher earnings will generate more sales revenue for local business firms and will raise wages for a large segment of the workforce.

There also is a stark difference in the unemployment rates between college graduates and high school graduates. In 2012, the unemployment rate was 8.3 percent for a high school diploma holder. For someone with less than a high school diploma, the rate was 12.4 percent. In contrast, people holding bachelor's degrees had an unemployment rate of 4.0 percent.

Worker job satisfaction, as measured by a sense of learning new things, is correlated with the education level. Approximately 94 percent of workers with a college degree say they agree or strongly agree with the statement their job requires them to learn new things. Meanwhile, holders of a high school diploma only agree or strongly agree 81 percent of the time with the statement. It also is true that people with a college degree are more likely to have a pension plan at work and employer-provided health insurance.

From a societal perspective, only 5 percent of college graduates are living in poverty. For the high school diploma holder, the rate goes to 14 percent, and for those without a high school diploma, the rate climbs to an alarming 28 percent. Public assistance, whether measured by Medicaid, school lunch programs or supplemental nutrition assistance programs, tells a similar story about the positive impact of higher education. The higher the education level, the less likely a household will participate in one of these programs. For example, only 9 percent of households headed by college graduates are on Medicaid, compared to 43 percent of households with less than a high school education. Rates of smoking, adult obesity, childhood obesity and time spent with children improve with family educational attainment.

A college degree also is highly correlated with civic engagement. Understanding of economic and political issues rises dramatically with education level. A College Board survey indicates that 45 percent of people with a college degree or higher identify themselves as having a great deal or lot of understanding of the major issues confronting the U.S. In contrast, 21 percent of people with a high school diploma said they had a good understanding of the issues. Lastly, only 15 percent people without a high school degree said they understood the political and economic issues facing the country. The study found similar results for voting participation and volunteer activity.

A study by the Rand Corp. found that more highly educated people pay more taxes, are much less likely to need social support programs and are less likely to be incarcerated. The gist of this is that raising the educational level of the population yields a net benefit to the public budget. In other words, investing in higher education ultimately helps governmental budgets.

To summarize, education is a good investment for individuals and for society as a whole. Given the economic evidence, I have a difficult time understanding efforts to reduce higher education funding on an inflation-adjusted per student basis. This seems to me to be very short-sighted policy that has contributed to the well-documented stagnation of median household income.

Randy Cray, Ph.D., is the chief economist at the University of Wisconsin-Stevens Point's Central Wisconsin Economic Research Bureau.